Trade war talk and lower NFP print gave EURUSD an opportunity to bounce. But option defender at 1.2200 and FOMC on Wednesday are lending a hand to push the price to 1.2370 again. And possibly the start of the next leg up on this pair.
Following the last FOMC minutes where the indication was given that the FED will hike a total of 4 times this year. Preemptively inviting euro sellers. The upcoming minutes of the meeting are likely hawkish too and inline with the last one. In other words old news. There is a slight downward risk if lower growth is acknowledged. Which will hurt USD a lot.
As US trade war rhetoric gains pace, euro is a buying opportunity as a safe haven. We don’t believe an all-out war is happening but the sentiment is souring. We could see more negatives than positives.
Seasonality suggests Euro outperforms Usd in April. Coupled with a daily reversal short of the 1.2200 options barrier. We have a tactical advantage to drive price towards 1.2370 and possibly higher again.
The risk to the trade
Euro heavy long positioning unwind. This is a constant threat but as long as euro bulls see ECB on course of ending QE this year we won’t see this happening easily. U.S. earnings season is upon us next week, and while that primarily affect Indices, U.S. inflows could help USD and consolidating EURUSD. Lastly, Euro data has been trending lower since January and just recently picked up. We see growth on track but unless economic data reflect that, we won’t have a solid bottom to initiate a core trade long.
We’re seeing Euro much higher this year. As the pair is in a cyclical uptrend supported by Eurusd Qe unwind. Following USD weakness in the coming week, we are hunting 1D&4h IBs to go long targeting 1.2370 and should data support euro, the price could challenge March highs.